Tuesday, August 4, 2009

Speculation curbs could force ETFs to slow growth (UNG; USO)

From MarketWatch:

A possible U.S. regulatory clampdown on big energy speculators could also hit exchange-traded funds backed by commodities, making it harder for investors of all sizes to buy new shares and forcing fundamental changes to the way they do business.

The Commodity Futures Trading Commission, which will hold its last of three hearings on commodities speculation Wednesday, is considering setting strict caps on the number of contracts financial investors can buy in energy futures.

These position limits are designed to prevent single, large investors from exerting too much influence over the price of any one commodity. Big investment banks have drawn policymakers' ire over their role in helping financial speculators bet on oil, which some contend has helped drive up prices more than double from lows this year.

But ETFs, heavily used by institutional investors such as hedge funds and banks like Goldman Sachs Group Inc. as well as an increasingly popular tool for retail investors, have also come under scrutiny for contributing to wild swings in prices....MUCH MORE